Loading...

The role of alternative dispute resolution (ADR) scheme in the settlement of disputes within commercial transactions

Research Paper (postgraduate) 2003 57 Pages

Business economics - Law

Excerpt

TABLE OF CONTENTS

Chapter 1: The Alternative Dispute Resolution (ADR) Movement – Introduction And Definitions
1.1 The ‘New’ Wave
1.2 Background
1.3 The Notion Of Disputes
1.4 The Notion Of Settlement

Chapter 2: Presentation Of The Alternative Dispute Resolution Processes Available For The Settlement Of Commercial Disputes
2.1 The Basic Processes In Commercial Dispute Resolution
2.2 Arbitration
2.2.1 The Arbitration Procedure
2.2.2 The Legal Framework For International Commercial Arbitration
2.2.3 Harmonisation Of Law-Uncitral Model Law
2.2.4 International Chamber Of Commerce
2.2.5 American Arbitration Association
2.3 Mediation
2.3 1 The Mediation Process
2.3.2 Wipo Arbitration And Mediation Centre
2.3.3 Icann
2.4 Banking Ombudsman

Chapter 3: The Picture Of Adr Scheme In Relation To Litigation
3.1 Why The Adr Scheme Is Distinguished From Other Methods Of Resolving Dispute In The Commercial Field
3.1.1 Advantages
3.1.2 Disadvantages
3.2 Qualifications And Skills Necessary For The Best And Right Selection Of The ‘Alternative’ Third Parties
3.3 Courts And Litigation

Chapter 4: Conclusions
4.1 Is Adr Capable Of Replacing The Court Proceedings When Dealing With (International) Commercial Disputes
4.2 The Emergence Of Online Dipsute Resolution (Odr)
4.3 Recommedations-Conclusions

References

Appendices

SUMMARY

Society's desire for easier and quicker access to justice led to the development of Alternative Dispute Resolution (ADR). 'Alternatives' to litigation, such as arbitration, mediation and banking ombudsman are examined as to their efficiency and capabilities in the settlement of (international) commercial disputes. It is concluded whether litigation can be successfully replaced by the ADR scheme in the resolution of disputes that arise in commercial transactions.

LIST OF ABREVIATIONS

illustration not visible in this excerpt

Chapter 1: The Alternative Dispute Resolution (ADR) Movement – Introduction And Definitions

1.1 The ‘New’ Wave

Nowadays, while everything is too perplexed in everyday life, litigation is offered as the primary way to arrange any legal dispute that arises. Misunderstandings and conflicts can never be avoided during commercial transactions, despite how carefully the contracts are drafted. Since large sums of money are involved in business activities and nobody wants to waste his/her time and money when a disagreement occurs, the conflicting parties tend to be more dependable on ways that satisfy their needs. Namely, they prefer those methods that are less formal than court proceedings, cheaper and offer speedy solutions to their problems. In recent years, people’s desire for easier access to justice led to various other attempts to avoid the court route. More specifically, the business community, without ignoring the vital role of the courts, calls for reform of the current litigation system and supports ‘alternative’ routes to traditional litigation that derive from the need to avoid the non-functional, bureaucratic court procedures, known as ‘Alternative Dispute Resolution’ or with its universal acronym ADR.

There is a variety of definitions that describe this mechanism since there is not any statutory or generally accepted definition of the ADR term. Simply, it refers to “any procedure, agreed to by the parties of a dispute, in which they call upon the services of a neutral party to assist them in reaching agreement and avoiding litigation” (United States Department of Labor, 2003a). Particularly, the neutral party facilitates discussions with the parties on the merits and values of their claims and assists with the writing of such agreements that reflect their needs. Moreover, the term considers covering any out-of-court procedures in which disputing parties have the opportunity to resolve their case, in front of a retired judge, without the high cost, time elements and uncertainty that are associated with traditional litigation. ADR is usually described as a group of informal processes, such as negotiation, conciliation, mediation or arbitration, which provides alternative ways for resolving disputes. In other words, it refers to “all DR mechanisms (or combinations and permutations of them), which are not normally available from the public court system, and are voluntarily used by the parties to a dispute, or contracted for in contemplations of future disputes” (Costello, 1999, pp.62-3). Brown and Marriot (1999, p.12) characterise ADR as “a range of procedures that serves as alternatives to the adjudicatory procedures of litigation for the resolution of disputes, generally involving the intercession and assistance of a neutral and impartial third party who helps to facilitate such resolution.” Freeman (1995) summarises it in the introduction of his book entitled Alternative Dispute Resolution as “a set of practices and techniques that aims to permit legal disputes to be resolved outside the courts for the benefit of disputants; to reduce the cost of conventional litigation and the delays to which it is ordinarily subject or to prevent legal disputes that would otherwise likely be brought to the courts.” According to the Centre for Effective Dispute Resolution (CEDRa, 2003, online), ADR is “a body of dispute resolution techniques which avoid the inflexibility of litigation, and focus instead on enabling the parties to achieve a better or similar result, with the minimum of direct indirect cost.” Finally, Appendix 1 (a) and (b) presents all (primary and hybrid) DR processes as illustrated by Goldberg, Sander and Rogers (1992) which can be from facilitated settlement negotiations, arbitration systems to ombudsman, and mini-trials.

1.2 Background

Thousand years ago, King Solomon had to settle a dispute between two mothers, who were claiming a baby as their own, by being ‘the arbitrator’. The philosophical roots of the ADR movement lie in the concerns generated by the philosophical and professional aftermath of the 1960s generation, i.e. “concern with peaceful resolution of disputes from community to global contexts; for there to be recognition of the failure of many traditional social mechanisms to respond to the new challenges of a consumer-led society; an undermining of the concept of professional expertise and status in favour of client self-direction; a wave of anthropological studies which brought attention to the roots of community dispute resolution mechanisms” (Mackie, 1991, p. 2). Until now, some of the major targets that societies discern within the movement are a) to relieve court congestion, undue costs and delays b) to encourage community involvement in the DR process and c) to provide more effective dispute resolution (Freeman, 1995). The word ‘effective’ implies an inexpensive, flexible, speedy and fair mechanism which wills satisfy the interesting parties. Nevertheless, the development of ADR has its principal origins in the courts.

ADR is dated back to the fifth century in ancient Greece. The commercial success was owned to the Hellenic naval power which started from Corinth, one of the greatest commercial centres in ancient Greece, and was later expanded to the whole world. It was common to see the Phoenician and Greek traders to employ commercial arbitration -the primary mode of DR- for the resolution of their maritime disputes as they were involved in trade and navy activities (King and Leforestier, 1994). “Epigraphic remnants record arbitral agreements between city-states in the mainland of Aegean, Asia Minor and on islands of the Aegean and Ionian seas” (King and Leforestier, 1994, p.40). Since the introduction of the Recommendation (86) 12 of 16.12.1986 by the Committee of Ministers of the Council of Europe and of the Art. 214A Greek Code of Civil Procedure (CCP) added by Law No. 2298/1995, the concept of ADR is officially introduced in the Greek civil system. Under the latest legislation No. 2479/1997, parties in a dispute must before the Court (Multi-Member Court of First Instance [Polymeles Protodikeio]) attempt to settle the case outside the courtroom (epilysis.com, 2003).

The modern ADR movement originated in the United States in the late 1960s as “a social movement to resolve the community-wide civil rights disputes through mediation, and a legal movement to address increased delay and expenses in litigation arising from an overcrowded court system” (Brown, Cervenak and Fairman, 16/6/2003). More specifically, in 1964, the Civil Rights Congress established the Community Relations Service in the US Department of Justice to aid courts and others in resolving racial and community disputes (Freeman, 1995). Since then, the American Bar Association (ABA), the US Congress and the state governments helped in the evolution of the ADR. Hence, in our days, the Alternative Dispute Resolution Act of 1998 authorises the use of court-annexed ADR in federal courts. Also, according to the Title 9 (Chapter 1-3) of the US Code (U.S.C) under the Federal Arbitration Act (FAA) of 1926 whoever subject to an agreement must arbitrate. Furthermore, nearly 35 states (such as Mississippi, Puerto Rico, Alabama) have adopted the Uniform State Arbitration Act (UAA) of 1955 and relevant state statutes as state law. In 2000, the National Conference of Commissioners approved the updated Revised Uniform Arbitration Act (RUAA), with the purpose of dealing with more complicated commercial disputes.

In the mid-1980s, the ADR movement also emerged in the UK. In the beginning, the introduction of the concept of ADR was an amusing fact. Until recent years, courts such as the Courts of Requests and the Piepowder Courts that were dealing with small claims, were said “to attract merchants because of speed and simplicity of procedure and because the law administered in the Courts gave effect to their own customs which formed the basis of their dealings” (Mackie, 1991, p.28). Though, around 1999, Lord Woolf’s Report entitled ‘Interim Report on Access to Justice in the Civil Justice system in England and Wales’ revealed the need for reform of the present civil justice system and the encouragement of the ADR mechanism. The aim was to improve by suggested recommendations the ‘access to justice’ since there was an urgent need for a procedural change. Now, ADR is being actively promoted under the new Court Procedure Rules (CPR) 1998 and Rule 1.4 (2) (e) according to which “active case management includes encouraging the parties to use an ADR procedure if the court considers that appropriate and facilitating the use of such procedure.” The Arbitration Act of 1996 served as the only statutory instrument in England for the settlement of commercial disputes.

1.3 The Notion Of Disputes

The ADR scheme has given the greatest chance for studying law not only just as a set of rules and principles, but also as procedures that actually attract the specialists to focus on the issues that arise, by approaching them in a different way. It is important for an ADR specialist to recognise the problem and understand the dispute and its implications. Then, he/she needs to explore and examine carefully the issues involved and each party’s motivations, preferences and interests.

Particularly, according to Mackie (1991, p.278) “the expression of a dispute is an essential part of a healthy and vigorous democracy”. A dispute may be viewed as “a class or kind of conflict which manifests itself in district, justiciable issues” (Brown and Marriott, 1999, p.2). Usually, it involves a disagreement between two or more parties. Hence, whenever there is an interaction between the parties and a person believes that his/her interests are not identical to those of the others, there will be a dispute. On the contrary, it will not exist until a claim is asserted by one party which is disputed by the other. More specifically, it is “a specific disagreement concerning a matter of fact, law, or policy in which a claim or assertion of one party is met with refusal, counter-claim or denial by another” (Detersmann and Jaenicke, 1992, p.5).

There are two types of disputes: those that arise from an existing relationship or existing agreement (rights disputes) and those that occur when parties trying to forge a relationship or negotiate a new agreement (interest disputes) (Lipsky, 1999, p.67). According to Detersmann and Jaenicke (1992, p.5), the former type is considered to be the most important as it normally characterises all legal disputes and relates to “any conflicting assertions as to the rights and obligations of the parties.” According to the Permanent Court of Justice, a dispute is “a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons” (Detersmann and Jaenicke, 1992, p.5).

It appears that the complicated commercial disputes arise from issues that occur from a variety of commercial activities. These issues may relate to money, rights, reputation and status. The commercial and business disputes may also arise from contract, insurance, maritime claims as well as intellectual property or trade problems.

Sometimes, the meaning of dispute is confused with the term ‘conflict’. Conflicts are an inevitable part of our everyday life. It occurs when two or more people oppose one another because of differences in their goals and wants. When their objectives are completely incompatible, then this usually leads to a behavioural conflict which in more extreme cases, it becomes even more violent, and in international level is described as a war. Webster’s Dictionary describes conflict as “a battle, contest of opposing forces, discord, antagonism existing between primitive desires and instincts and moral, religious, or ethical deals.” In Roget’s Thesaurus, the following words are used to define conflict: ‘dissension, strife, friction and disagreement’. According to the Concise Oxford Dictionary, conflict is defined as “a state of opposition or hostilities, a fight or struggle or the clashing of opposed principles.” Generally, conflict will always be related to anger, hurt and distress.

1.4 The Notion Of Settlement

It is certain that business people want to eliminate their problems with others and find the best solution that they can. Their relations with other organisations or legal entities are significant and because of their common interests, it is logical that they would prefer to retain them. Thus, both sides in such cases would also prefer to reach mutual agreements when a dispute arises. Therefore, under the scheme of ADR they have to compromise. Whereas in the case of litigation usually one of the parties fails to compromise, in the case of ADR through discussions, many opportunities are given, so as to contemplate the pros and cons of compromising a claim.

Generally, there are three options of settling their disputes. According to the ‘consensual’ DR, the disputants will settle the disagreement by reaching a new consensus and ‘a new coinciding of their interests’ (Morris, 2002). Important fundamentals for such arrangements between the parties are their willingness and intention to re-examine their objectives. The result of such kind of settlement is based on parties’ free will. Some examples of consensual settlement are negotiation and mediation. Another way of resolving a dispute is through the ‘adjudicative’ DR, in which the parties depend on a third-party who through his/her impartial role, will decide which interests should be satisfied and which should not be (Morris, 2002). The presence of that person is crucial since he/she will have to make a binding decision for the interested parties. Based on pre-existing rules agreed by all parties involved, the tribunal or the arbitrator will finally enforce their decision. Such method implies the weakness of the parties to achieve a desirable outcome alone and satisfy their goals. Examples related to that category are arbitration and court adjudication. The last solution that parties can address to is known as ‘legislative’ DR. It actually focuses on the rule-making by a group, an organisation, a formal legislative body or a ruler (Morris, 2002).

During commercial transactions, many opportunities are given for the creation of strong and long relationships between businessmen. Hence, everyone tries to avoid any misunderstandings soon after a dispute arises by reaching amicable settlements when needed, before formal proceedings became necessary. For these reasons, they tend to choose ADR since it provides “a forum for the parties to work towards a voluntary and consensual agreement” (United States Department of Labor, 2003b).

Chapter 2: Presentation Of The Alternative Dispute Resolution Processes Available For The Settlement Of Commercial Disputes

2.1 The Basic Processes In Commercial Dispute Resolution

There is a sufficient number of DR processes that are available to anyone interested in resolving commercial disputes. In order to get an ADR service either an ADR clause should be added in the agreement in advance (Appendix 2) or there should be an express agreement. Once the dispute arises, then the procedure set forth in the clause will be followed. In the past, a contractual obligation to mediate disputes was seen as a ‘moral’ obligation. Nowadays, such clauses are regarded as enforceable and effective. Though, they must be carefully drafted and unambiguous. It seems that the latest years, judges not only insist on their (clauses) enforceability, even when the ADR process is not specified, but also they support their usage. Usually, if a lawsuit has been filled, most of courts mandate mediation or arbitration or any other process between the parties, prior to the proceeding to trial.

In a recent case, Cable and Wireless vs IBN United Kingdom Ltd [2002] EWHC 2059, the parties entered into a Global Framework Agreement (GFA), according to which IBN had to supply worldwide IT services. The Commercial Court had to deal with a matter of enforcement of an ADR clause, particularly of ‘escalating’ mediation clause. As it was expected, the High Court judge did not accept the arguments presented by Cable and Wireless and refused to give a declaratory relief in their dispute, by giving effect to the DR provision that required the parties to follow the specified ADR procedure, recommended by the Centre for Effective Dispute Resolution (CEDR). He stated that “in the post-CPR climate, for the courts to decline to enforce contractual references to ADR on the grounds of intrinsic uncertainty would be to fly in the face of public policy, as expressed in the CPR and as reflected in the judgement of the Court of Appeal in Dunnett and Railtrack [2002] EWCA Civ 303” (in CEDR, 2003, online). Moreover, it represented “a free-standing agreement ancillary to the main contract and capable of being enforced by a stay of the proceedings or by injunction absent any proceedings” (Cable and Wireless vs IBN United Kingdom Ltd [2002] EWHC 2059). For these reasons, the claimants who did not accept to attempt ADR were in breach of contract and litigation was the last resort.

Strong (2002, p.1055) also confirms that “courts take a ‘robust’ approach towards those who do not try ADR without good reason, especially towards those who make the right choices about contemplating ADR in their contracts, but refuse to attempt it when the disputes arise”. Furthermore, judges are of the opinion that they should use their discretion to stay the proceedings, in order to give more time to the ADR ‘alternative’.

2.2 Arbitration

In the commercial world, arbitration is regarded as the most favourite and popular means of DR, because of its binding and flexible character. It is increasingly used at international level considering the growth and the range of activities of multinational enterprises. It is frequently seen that when parties fall under different jurisdictions, they prefer the neutrality of a tribunal for resolving their disputes instead of being discriminated as non-nationals. They tend to be reluctant to enter into a process which requires the knowledge of the other party’s national legislation.

Neither the British nor the American law provides any statutory definition. Generally speaking, arbitration may be defined as a “a private mechanism for the resolution of disputes which take place in private pursuant to an agreement between two or more parties, under which the parties agree to be bound by the decision to be given by the arbitrator according to law after a fair hearing, such decision being enforceable at law” (Brown and Marriott, 1999, p.49). Furthermore, arbitration can be defined as “the consensual form of DR in which parties agree to submit their differences to a third party or a tribunal for a binding decision” (Goode, 1995, 1176). The American Arbitration Association (AAA) (2003) has defined arbitration as “a referral of a dispute to one or more impartial persons for final and binding determination. It is designed to be private, informal, quick, practical and economical”.

Moreover, it is the only type of DR that a) is more akin to the procedure of litigation and b) the decision of the arbitrator or of the tribunal which is enforced by the courts is binding on the parties. Sometimes, there is confusion between these two terms and arbitration is perceived as a non-ADR form (Phillips, 2003). On the other hand, arbitration differs from court adjudication in that the former is characterised from the formal hearings, the fact that the strict rules of evidence are not applied and the arbitrator does not need to justify his/her decision. Furthermore, companies are free to select a tribunal that reflect their needs and cultures instead of submitting to other party’s jurisdiction.

In addition, there are two other types of commercial arbitration, namely the ‘institutional’ (administered) and the ‘ad hoc’ arbitration. The former type is the one in which “the arbitrator is appointed, the proceedings conducted and the award issued in accordance with the rules of a national or international chosen arbitral organisation/institution and the arbitration is wholly or partly administered by that organisation, such as the ICC and AAA” (Brown and Marriott, 1999, p.1179). The latter type “requires the parties to agree a procedure or adopt non-institutional guides, such as the Rules of the United Nations Commission on International Trade Law (UNCITRAL)” (Michaelson, 2003, p.147). The ad hoc arbitration is more flexible since parties are not restricted to a certain mode of procedure. Plus, it is speedier and less expensive when institutional arbitrators are not involved. On the other hand, the institutional arbitration offers the administrative service for the realisation of the proceedings and parties know exactly how to proceed, with the guidance that is available to them.

2.2.1 The Arbitration Procedure

Compared to mediation (see below in s.2.3), arbitration cannot take place without the mutual agreement of parties to arbitrate. Under s.6 (1) of the English Arbitration Act of 1996, an arbitration agreement is defined as “an agreement to submit to arbitration present or future disputes.” The same approach is followed by the AAA as described in the first part of the Guide to Arbitration for Business People. It is considered the most important stage of the arbitration process according to which, where a potential dispute, the inclusion of parties’ intentions in a well-drafted arbitration clause (clause compromissoire) will ensure that nobody arbitrates against his/her will. It seems that parties/companies prefer to do this in advance rather than at the time when the dispute arises since it is a matter of common sense. Once the dispute arises, none of the parties would fall back to agree on any matter. On the contrary, they would resort to the courts.

In addition, the arbitration agreement should state parties’ preferences as to the panel. The parties are jointly expected to go through a list of proposed arbitrators and decide the name and the number of the arbitrators they want to appoint, depending on the complexity of their dispute. In some jurisdictions, the parties may want their arbitrator to be a lawyer (Spain) or a Muslim (Saudi Arabia) (Reisman et al., 1997). In general, the tribunal may be consisted of up to three impartial arbitrators.

Some other considerations that need to be taken into account in the formation of the contract between business parties are with regard to the place, the language and the applicable law. Hence, the place can be considered in relation to the political environment, the telecommunication system as well as the legislation of each country. The language must be suitable for the needs of the arbitration process, that is the communication among the disputants and the writing of the contract. Finally, it is better that such an important agreement not to be included in an arbitration clause, but separately in another clause. Usually, disputants choose the law that is similar to their own legal system (civil or common law). The tribunal in international commercial arbitrations will have to consider the law applicable to the arbitration agreement, the law applicable to the arbitration proceedings (the seat of the arbitration), the law applicable to the dispute itself (the governing law), the law applicable to the enforcement of any award, and the law applicable to determine the capacity of the party to enter into the arbitration agreement (Michaelson, 2003). After the exchange of evidence, the tribunal will attribute the award.

2.2.2 The Legal Framework For International Commercial Arbitration

In international commercial arbitration, what matters is the enforcement of an enforceable award. Due to the variation in national arbitration laws, all interested parties involved in commercial transactions seek “to establish a stable, predictable legal environment in which international commercial arbitrations can be conducted” (Born, 2001, p.19). Therefore, the conformity with relevant legislation, usually in the form of treaties and conventions, is quite important.

The first attempt for the enforcement of arbitration agreements and of arbitral awards was the adoption of the Geneva Protocol of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927 under the auspices of the League of Nations. In order for the award to be enforced, it should be “final in the country in which it has been made” and the enforcement “not contrary to the public policy or the principles of the law of the country in which it is sought to be relied on” (Art. 1 (d) and (e) of Geneva Convention 1927). However, the Convention was not widely ratified or frequently used.

In 1958, the most significant multilateral treaty initiated by the ICC was signed in New York. It deals with international commercial arbitrations and is known as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the New York Convention. It has been ratified by 121 parties. Particularly, this Convention requires the courts of each contracting state “to recognise the arbitration agreements in writing and to refuse to allow a dispute to be litigated before them when it is subject to an arbitration agreement” and “to recognise and enforce foreign arbitral awards” (Art. II, III, V). Under Art.5, the grounds under which the award may be denied from being enforced can be the incapacity of the parties, the denial of fair hearing, some procedural irregularities and an invalid award.

Later on, in 1975, the USA signed a similar Convention, that of the Inter-American Convention on International Commercial Arbitration (IACAC) or the Panama Convention (Title 9, Chapter 3 of the U.S.C). The difference is that it was ratified and applied only to the US and South American nations, such as Argentina and Mexico. Both the New York and Panama Conventions targeted at adopting a uniform approach to commercial arbitration.

Overall, all the aforementioned Conventions that constitute the legal framework for International Commercial Arbitration assist in “making agreements to arbitrate enforceable, forcing the stay of concurrent litigation and limiting the power of a court to refuse the enforcement of foreign arbitral awards to procedural grounds comparable to those contained in the FAA” (Goldberg et al., 1992, p.361). If the parties have not selected any rules for the arbitration proceeding, then the IACAC Convention will apply.

2.2.3 Harmonisation Of Law-Uncitral Model Law

In 1985, the UNCITRAL Model Law on International Commercial Arbitration was adopted by the United Nations Commission on International Trade Law by a resolution of UNCITRAL in Vienna and by a UN General Assembly resolution. It was designed to be “implemented by national legislatures, with the objective of harmonising the treatment of international commercial arbitration in different countries” and achieving uniformity in the national laws and statutes (Born, 2001, p.45). The Model Law not only contains a set of rules and a model arbitration law for the good conduct of arbitral proceedings, but also “prepares and promotes the adoption of new conventions, laws and codification of international trade terms, customs and practices and coordinates the work of organisations active in the international trade field” (Reisman et al., 1997, p.242). It was drafted in such way so as to be accepted by any country, either socialist or capitalist, and to have a uniform cultural character.

In more detail, the Model Law contains 36 articles concerning the enforcement of arbitration agreements (Art.7-9), the composition of arbitral tribunal (Art. 10-15), the jurisdiction of arbitrators (Art.16), the provisional measures (Art, 17), the conduct of the arbitral proceedings (Art.18-27), the making of an award (Art.28-33), the application for setting aside awards (Art.34) and the recognition and enforcement of awards (Art.35-36).

It has been adopted as a global standard guiding framework by a number of countries, such as Germany, Canada, Greece, Scotland, Australia, Hong Kong and Singapore, Egypt, India, Iran and some US states (California, Texas Oregon). On the other hand, countries such as England, Switzerland and France with long-term experience on arbitral matters may have refused its adoption, but they have not denied using it as “a useful yardstick against which to draft new legislation on international commercial arbitration” (Freeman, 1995, p. 69). The Model Law usually applies in ad hoc arbitrations.

2.2.4 International Chamber Of Commerce

In 1919, the International Chamber of Commerce (ICC) was established by the representatives of the business world of France, Britain, Belgium, Italy and the United States. It is the world’s leading private, non-profit and non-governmental institution in international commercial DR with members in around 150 countries and national committees in 60 states. Its main objective was to “create an institution that would foster reconciliation and peace through the promotion of international commerce” (Derains and Schwartz, 1998, p.1). In particular, the aim was to simplify and improve the international business relationships by harmonising the international trade legislation and adopting universally accepted mechanisms which would apply to any country, any system and law, for the settlement of commercial disputes, without having to resort to the judicial route.

More specifically, in Bank Mellat and Helliniki Techniki SA (1984) Q.B 291 at 304, it was said that “the ICC Rules of Arbitration provide a code that is intended to be self-sufficient in the sense that is capable of covering all aspects of arbitrations conducted under the rules, without the need for any recourse to any municipal system of law or any application to the courts of the forum”. In Bank Mellat and GAA Development and Construction Co (1988) 2 Lloyd’s Rep 44 at 48, the judge described the ICC Court of Arbitration, through which he ICC administers individual arbitrations, as “the most truly international of all arbitral systems”.

The ICC Court acts in a ‘supervisory and appointing capacity’ of the arbitral proceedings that have followed the ICC model and it does not decide itself disputes as it is not a ‘court’ as such. With an 80-year experience in the area of international commercial arbitration, the ICC Court has administered nearly 10,000 cases of $40,000 so far, in more than 170 countries (Art.1 (2) of ICC Rules 1998).

The first Rules of Arbitration and Optimal Conciliation of the ICC were adopted in 1988; they were recently revised in 1998, known as the ICC Rules of Arbitration. The translation of the Rules into the English, French, Arabic, Japanese, German or Russian language was one of the greatest and most successful attempts that helped in making them known worldwide and implementing them.

2.2.5 American Arbitration Association

Another large organisation, which has its headquarters in New York, with 40 offices nationwide and 56 cooperative agreements with other institutions in 39 countries, of equal importance as to the settlement of commercial disputes worldwide is the AAA. It was established in 1926. It serves as an independent, private and non-profit institution that maintains fair and impartial procedures of DR as an effective alternative to the courts. Its objectives are to study, research, promote, establish and administer procedures for the resolution of disputes of all kinds, through the use of arbitration, mediation, conciliation, negotiation, democratic elections and other voluntary procedures as are set forth in the certificate of incorporation, as consolidated and amended.

The AAA Commercial Arbitration Rules are frequently used, but they are only applicable for domestic cases. Since the introduction of the International Arbitration Rules and the Supplementary Procedures for International Commercial Arbitration that deal with both national and international commercial disputes, the number of the cases/arbitrations administered by the AAA is over 140,000.

2.3 Mediation

Mediation has become an increasingly popular method for resolving commercial disputes in Europe and the United States. The latest figures confirm the rapid growth in the use of mediation, by showing parties’ preference to such method. In 1998 (p.9), Lipsky and Seeber conducted a study titled as ‘ The appropriate resolution of corporate disputes: A report on the growing use of ADR by US corporations’, in which they reported that from among 528 of the largest US corporations, 88% used mediation whereas 80% used arbitration. Moreover, 84% of the respondents were likely to use mediation more frequently in the future compared to those who would prefer to use arbitration (69%).

For business clients, litigation entails huge expenses, delays in the resolution of their disputes and damaged business relationships. For that reason, many institutions such as the CEDR are founded. CEDR (2003b, online) defines mediation is “a voluntary, non-binding, private DR process in which a third-party neutral helps the parties to reach a negotiated settlement”. Normally, a mediator attempts to “elicit a compromised solution for the parties” (Chuach, 2001, p.555). Furthermore, he/she does not have any authority to make or impose a binding decision on parties and any settlement is reached when both parties sign a contract. Usually, mediation address to continuing relationships.

Most of the time, mediation is confused with conciliation. In the recommendation R (2001) 9/5.9.2001, despite the fact that there was a difficulty in distinguishing these two terms, the Council of Europe attempted to provide some clarifications as to the matter. More specifically, mediation is described as the process in which a third party offers a non-binding opinion or recommendation whereas in conciliation, he/she helps parties to find a meeting point between these positions (Council of Europe, 2002).

Additionally, a mediator may approach the problem by following the ‘facilitative’, the ‘evaluative’, the ‘activist’, the ‘transformative’ or the ‘narrative’ method. In facilitative mediation, interest-based negotiation approach is followed, according to which the mediator helps the parties “to explore options and enhance their mutual interest” (Berstein et al., 1998, p.565). This type of mediation is widely known in North America, and it is used when commercial issues arise. In evaluative mediation, a more right-based approach, the mediator makes suggestions or “expresses a view on the merits of the dispute” (Berstein et al., 1998, p.565). Actually, this approach is not preferable because it pre-empts parties from reaching their own opinion/s. Some other mediators are ‘activists’ because they intervene so as “to ensure all parties are represented and that power balances are addressed”, without making any particular recommendations (Morris, 2002, online). When mediator’s purpose is to improve the relationships between the parties, rather than proposing a solution, it is known as transformative mediation. Lastly, if the mediator is “more of a joint participant with the parties in the joint creation of the new possibilities for the future”, then it is about narrative mediation (Morris, 2002, online).

2.3 1 The Mediation Process

First of all, there are not any specific procedural rules for mediation. Hence, the parties can either define the procedure they wish to follow according to their needs or follow a process that is suggested by mediation services. The main feature of the mediation process is that only the disputing parties control the process and have the power to decide the outcome.

Initially, the jointly chosen mediator needs to recognise the actual dispute and the relationship of the parties. Then, he/she must make the appropriate arrangements as far as concern the time, the date and the place of mediation. Before entering the actual negotiation, he/she is obligated to inform the disputants about the procedure. Then, the parties must agree on whether they would be consulted separately in a private session, known as ‘caucus’ or jointly. In the private session, the mediator, through various questions, should identify possible areas for agreement with the other conflicting party. When in joint session, the parties have to present their arguments while the mediator encourages them to pay attention to each other’s statements without interrupting each other and supports them to come up with particular proposals. Once the parties are familiar with the issues, they gradually reveal their real motives and interests. By the end of session, the mediator must reach a common ground and come up with creative scenarios/solutions for the resolution of the conflict. Then, he/she confirms them that the settlement agreement will be signed, which actually is a compromise.

Mediator’s presence plays a catalytic role. The mediator has only to assist the parties by reopening channels of communication, clarifying their needs, remaining a source of trust and confidence for the parties, diffusing hostility, reducing the adverse impact of emotions and suggesting an alternative, based on the information provided that has not be considered yet. Moreover, he/she has no authority to make rulings because he/she is not a judge. Any opinion expressed by him/her will be regarded as non-binding.

The resulting agreement will be written down in the form of contract. But, even where mediation does not work for the parties, at least both sides are aware enough of the issues. According to Webber (2000, p.654), the majority of mediators support that three are the key elements for a successful settlement: “a) all parties in the meeting should have the authority to settle b) there must be a genuine intention to find solution to the problem and c) the case should be well prepared”.

2.3.2 Wipo Arbitration And Mediation Centre

The Arbitration and Mediation Centre of World Intellectual Property (WIPO), that is based in Geneva, Switzerland, started its operations in 1994 as an international centre which offers mediation and arbitration for the resolution of international commercial disputes (it mostly covers technology and intellectual property disputes). It also deals with trademark and software licences, computer contracts, distribution agreements, and film and music contracts. It has 177 States as members. Particularly, it is a specialised agency of the United States that “has focused significant resources on establishing an operational and legal framework for the administration of disputes relating to the Internet and electronic commerce” (WIPO, 2003a, online). Today, the Centre is recognised as “the leading DR Service Provider for disputes arising out of the registration and the use of Internet domain names” (WIPO, 2003a, online).

The disputants can be from different jurisdictions, such as the United Kingdom, Japan, Germany, Spain, the United States and many others countries. One of the directors of the Centre said that “the underlying reason for the establishment of the Centre was a belief in the specificity of intellectual property as a subject matter and of the disputes concerning intellectual property, coupled with the conviction that arbitration and other DR alternatives offered particularly suitable means of accommodating the specific characteristics of intellectual property disputes” (Smit, 2000, p.4).

The Centre performs the following functions. Initially, it helps the parties to select from a list and appoint a mediator, and to arrange the fees of the mediator in consultation with the parties (Varady and Von Mehren, 1999). Moreover, it administers the financial aspects of mediation by obtaining a deposit from each party of the estimated costs of mediation and paying out of the deposit the fees of the mediator and any other support services of facilities, such as fees for interpreters, where they are required (Varady and Von Mehren, 1999). When mediation takes place at WIPO in Geneva, a meeting room and party retiring room are provided to the parties free of charge; if it is outside Geneva, the parties are assisted in organising appropriate meeting rooms. Furthermore, if other support services are needed, such as translation, interpretation or secretarial services, the Centre will assist the parties accordingly.

WIPO follows four different approaches for the resolution of intellectual property disputes, namely, ‘arbitration’, ‘expedited arbitration’, ‘mediation followed by arbitration’ and ‘mediation. The arbitration and mediation processes have already been described above. ‘Mediation followed by arbitration’ is a combination of the two major DR processes. ‘Expedited arbitration’ aims at rendering the award in a shortened time, at reduced cost and without oral hearings. Instead of referring to a whole tribunal, the parties refer to a sole arbitrator and the time is far more reduced in relation to the normal timing followed in arbitration stages.

[...]

Details

Pages
57
Year
2003
ISBN (eBook)
9783668179288
ISBN (Book)
9783668179295
File size
567 KB
Language
English
Catalog Number
v317295
Grade

Author

Share

Previous

Title: The role of alternative dispute resolution (ADR) scheme in the settlement of disputes within commercial transactions